Is it true that broker defaults are at a very high level in the current year? What are the reasons?

That is absolutely true. In fact, there have been 18 broker defaults on the NSE and 16 defaults by brokers on the BSE. This is the most since the Ketan Parekh scam rocked the markets nearly 20 years ago. Karvy and Anugrah are the two most high profile expulsions.

The net result is that there have been severe losses. While falling retail volumes and consolidation in a handful of brokers is one reason, what is also surprising is that brokers have been blatantly consuming and pledging client shares like it was their own shares and there appears to be no accountability. Karvy is the worst of such examples.

Another high profile that is not included in this defaulter list is India Nivesh which opted to voluntarily wind up but the problems were exactly the same. In all the cases, the brokers have been blatantly doing this under the nose of SEBI and the exchanges.

As a reaction, the exchanges and SEBI have tightened the noose around brokers putting limits on POA, pool accounts, forced pledge etc. Markets are also intrigued that at no point have these brokers fallen back upon the IPF.